On June 27, 2011, Governor Perdue signed into law Senate Bill 414 making reciprocal attorneys’ fees provisions enforceable in business contracts. This is a significant change of law in North Carolina in that businesses can now contractually shift the burden of attorneys’ fees to the other side if forced to litigate their disputes.

Under the so-called “American rule,” the general rule in the United States is that each side pays their own way in civil cases. This is in contrast to other countries where the losing party is required to pay the prevailing parties’ fees. This default allocation, however, can be modified by statute to allow for recovery of attorneys’ fees in certain contexts. The enactment of Senate Bill 414 (codified as N.C. Gen. Stat. § 6-21.6) effects such a modification, allowing businesses to contract for reimbursement of attorneys’ fees.

The scope of the new law is limited to provisions in written contracts between businesses. “Business contracts” are defined as contracts entered primarily for business or commercial purposes. Consumer contracts, employment contracts and contracts with the government are specifically excluded.

Notably, there is no limitation on the amount of fees recoverable, except that the amount cannot exceed the amount in controversy between the parties and must be “reasonable” in light of certain criteria. This is a departure from other statutes that cap recovery at a specified percentage of the amount at issue. There is also no automatic trigger for reimbursement under the new law, meaning the parties are free to define the conditions that trigger availability of attorneys’ fees.  The only requirement is that the terms of the provision are reciprocal and applicable to all parties.

The new law takes effect October 1, 2011 and applies to business contracts entered on or after that date. Businesses should consider whether a reciprocal attorneys’ provision is something to include in their contracts and also be on the look out for these provisions in contracts from other parties.

In an effort to close the revenue gap in the state budget without raising taxes, the General Assembly increased court fees with the new fees becoming effective July 1, 2011.  The funds generated by the increased fees will, for the most part, revert to the General Fund, though a small portion of the fee increase for District Court filings will be used to fund Legal Aid of North Carolina.

The changes include an increase for the filing of Complaints with Small Claims increasing to $96.00, District Court $150.00, and Superior Court $200.00.

In addition to these increases, there are new fees.  If an Answer includes a counterclaim or crossclaim, the defendant will have to pay the same fee as would apply to filing a Complaint for the applicable court.  If it becomes necessary to obtain either a endorsement of an existing summons or an Alias and Pluries summons, there will be a $15.00 fee for issuance of the summons.  And, every motion filed will require a $20.00 filing fee.  There is some question as to whether the legislature intended the motion fee to apply only to motions requiring a hearing, or whether it applies to all motions, including extensions of time.  For now, the Clerk’s Office is applying the fee to all motions pursuant to the language of the final budget bill which has been ratified.

If you have questions about these changes, please contact our office.